This year, South African stokvel members are expected to save an estimated R50 billion, according to the National Stokvel Association of South Africa (Nasasa).

This is more than the total market value of Woolworths (R49 billion), one of South Africa’s biggest retailers.

Some 11.5 million South Africans – more than the total population of KwaZulu-Natal - are members of 800,000 stokvel groups.

According to a Glacier report, the majority of South African households with incomes above R14,000 a month belonged to a stokvel, while 42% of those with an income above R40,000 are members.

The word stokvel derives from "stock fair." In the 19th century British settlers would buy cattle at stock fairs where participants rotated the management of the auctions. In the same way, many stokvels involve members pooling savings and taking turns to receive a fixed amount on a regular basis.

A quarter of the stokvels in South Africa are burial societies, which usually pay out in case of death. There are also grocery clubs where members save together to buy food in bulk; stokvels that invests in shares or small businesses; stokvels that save for holidays and even a couple of Le Creuset stokvels, where members put money away each month to buy the high-end kitchenware products.

A new trend is that many groups are becoming multi-purpose stokvels, says Mizi Mtshali, CEO of Nasasa.

Mizi Mtshali, CEO of NASASA

For example, some burial societies are looking at investing excess savings in bonds, unit trusts and property, while grocery clubs are offering burial cover for their immediate group members.

“This is occurring specifically amongst groups that have been together for five years and more. Groups are typically formed around a single function, which they perform well. Over the years, the bond between members is strengthened, and more opportunities are discussed,” says Mtshali.

Banks started offering investment products and accounts for stokvels more than two decades ago, and over the years other companies – including car dealerships – also started focusing on the stokvel market.

Last year, Sanlam teamed up with Nasasa to sell insurance and funeral benefits to burial stokvels and other savings groups.

“While stokvels are an excellent way to save together and help each other during times of need, they can run into problems,” says Mtshali. “Money issues can render groups unable to pay out the benefits they promise. That means members may not receive the funds they need to cover loved ones’ funerals.”

The insurance provided through the joint venture provides guaranteed funeral payouts to all kinds of stokvels – not only for burial societies, but also grocery and savings clubs.

“No matter what your group's purpose, should a member pass away, families often look to that member’s stokvel groups to contribute towards the funeral. As a result, we see all types of groups taking cover for their immediate members as well as immediate and extended family.”